Thanks for the feedback. 

As for the cross-posting, that's completely up to Lew, since he's in charge of both of them.  I have no control over that.  I see LRC as no more loony than the HuffPo, WND, or OpinionJournal.com  All are unapologetic in their agendas and equally polarizing.  I gave up years ago about worrying about being labeled anything.  I'm a full-on anarchist so LRC is the appropriate site for when the spirit moves to write.  LRC is the politically aggressive site, Mises.org is more of the pure intellectual one.  They both have their uses.  I would argue that LRC is more influential.  By a long shot.  I refer people to both depending on which approach will work better with that person. 

In the end, though, those that do not have eyes to see or ears to hear won't listen to either.  I've learned that planting seeds is all you can do and you'd be amazed at how long it takes for some people to sprout.  But, it happens.

Ta,

Bitcoin is a natural outgrowth of the types and kinds of ideas that LRC and the Mises Institute spread.  Earlier versions of the article went into that in more detail, but for brevity's sake had to be cut.  It was obvious to me 5 minutes after I first got to the homepage that there was an Austrian influence in the design and that's what sparked my interest.

The thread about the wikipedia page got me off my ass to start writing for LRC again.  What better audience than that one to pollinate with the ideas behind bitcoin.

Ta,

I wrote it.  I hope you enjoyed it.  Let's see if it results in some new interest.

Ta,

The OP brings up a point that I had originally when I saw this (though not quote Mises' regression theorem).  It is a real issue b/c money is not an intellectual process.  Your property is a physical extension of your efforts and as such any mucking with it promotes a visceral response.  I'm not sure that the act of bartering clock-cycles for digits constitutes a large enough opportunity cost to satisfy most people's definition of property.  It may.  We're too early in this cycle to determine that yet.  But, if Bitcoin's acceptance rate never really takes off, this problem will be a contributing factor; likely a big one.

Credit existed under the gold standard as well.  As the division of labor exploded during the gold standard the need for localized liquidity arose that the physical movement of metal could not keep up with; hence bank notes and credit forms of currency which traded at some discount to physical gold.  To say that credit was invented after gold is only true insofar as we go back to the beginning of humans using any form of exchange medium.

Credit has always existed.  Fractional reserve banking existed under the gold standard, locally.  They will exist under any potential bitcoin standard as well.  The issue with fiat currency is the consequence of the liquidity is can produce because of the incentive to produce money by those who issue it for their own purpose, ie. a theft of property by devaluing the currency units previously in circulation.

If communications technology had exploded at the same rate as the demands for money, digital gold currencies would have arisen and solved the liquidity problem by increasing the clearing rate of transactions.  They didn't, of course, and for a variety of reasons the system we have now was implemented.  Now that technology has caught up with the opportunity exists to swing the monetary pendulum back.

Uniquely identifying each bitcoin is a very good idea.  Think of them then as separate claims of property, like lots of land.  By doing this and keeping track of who owns which one (or fractional bit thereof) would add a tremendous amount of trust to the system. 

I'm not at all savvy vis a vis the programming logistics (eeek, run away), I'm more interested in the monetary theory, so salt all comments to taste.

I rule at PQ!!

Seriously, it's a joke game.

It does not solve the essential problem of there being two claims to the same property simultaneously, which is the fundamental flaw in all Fractional Reserve Systems.  I agree that people should be free to bank with whomever they choose, fractional reserve or otherwise, but you should do so knowing fundamentally that the institution is bankrupt.

Fractional reserve banking only works[1] because of the FDIC insurance system.  Depositors will be bailed out with depreciated funds due to their bank's profligacy and that's what creates the trust which exists in this system.  When the confidence that the FDIC will be able to pay depositors, well, then the system has reached its limit.

Bank Runs in the classic sense don't happen now.  Digits are moved from one bankrupt institution to another of slightly higher perceived solvency.

[1] - for very small values of 'works'

You're very welcome.
It is an easy trap to fall into.  It's one of the most powerful lessons taught by the Austrians.  It's also completely orthogonal to the dominant economic policies and teachings. 

It's also completely wrong.

This is simply the Monetarist desire for the rate of monetary increase to equal the output increase of the economy.  It is a false argument the Austrians have debunked for years and is one of the factors which has led us to the situation we currently have.  That's been the FED's policy... to match money growth to economic growth....it's one of their primary mandates, price stability.  NO NO NO.  Price deflation is a GOOD thing.  Your money buys more per unit.  You become more wealthy not only by investing in interest-bearing projects but through the increase in the value of what your savings (which pay no interest) will buy you.  It leads to thrift and investment in projects likely to have a higher return than the rate of price deflation.

The hoarding argument is the oldest Monetarist/Keynesian shibboleth in the book. It's nonsense.  You can't eat money.  Humans have time-preferential needs which require they be met.  Keynes' deflationary sprial is a silly reductio ab adsurdum argument in which he assumes people will hoard their money to the point of self-immolation. 

Nonsense.  The truth is, like everything else, once the price moves low enough people will see the arbitrage and use their money to satisfy their needs. 

The only long-term issue I can see is the attrition rate of lost Bitcoins at the end of the deployment cycle due to lost wallet files.  But, given that we have nearly 17 orders of magnitude of resolution baked into the system, I don't see how that is really much of a practical concern. 

The issue y'all are discussing around but not addressing is the issue of how much money needs to be available?  The market will always adjust the exchange rate to reflect changes in the supply and demand of money... up or down.  Rothbard went over this 30 years ago, and it's pretty simple.  Economic growth does not necessarily imply an increase in the demand for money, it's a fallacy to assume that.  It is the need to move money physical distances which eventually caused the demise of the gold coin standard.

If there is not enough of a given currency at any moment to clear a market something else will arise to temporarily allay the shortfall... credit money.  This is a market-driven process.  If the currency is nearly-infinitely divisible, like bitcoins and unlike physical gold, then this issue is obviated fairly quickly by allowing the exchange rate to rise resulting in smaller units of currency being transacted.  Monetary deflation and price deflation are not equivalent in any way, and they cannot be conflated (which is what scepticus is attempting to do).  One is a cause and the other is a potential effect.  They may be linked in a causal way but they cannot be substituted for one another.  All discussion which does this is nonsensical noise.

Commodity money bears with it the opportunity cost of its creation which is the natural brake on its generation.  It is not, as the Monetarists (ie. Friedmanites) would argue wasted capital in the service of producing that which confers no net good (one of Mises' definitions of money... the commodity whose production confers no net economic good)  It is providing that which the market demands... more money. 

If Bitcoin were to be successful enough to warrant greater fungibility than the current 8 orders of magnitude, then I'll happily cross that potential market bottle-neck when it arises.  This is would be an example of extreme price deflation without any necessitating monetary deflation.

Nothing could be better than for someone to come in and beat on the system at its margin to see what it can handle.  This is a far better stress-test than those issued to the banks, if true.

It also explains to me why I came back from being away for 4 days and only generated 1 block of coins. 

Until there is a non-zero number in the volume column a market has not been made (or is there a programming problem with the front page exchange display?)

Personally, EBay has taught me that 100 Gold Stars cannot overcome 1 well-considered Failing Mark.  Good commercial behaviour is a self-correcting system and will tend towards a minimum of fraud as it goes along.

As for this:
We're not building a justice system here.  That would be an outgrowth of the reputation system itself, a consequence of having one as it were.  Fraud, on both sides, would be dealt with via arbitration.  What that system will look like cannot and should not be planned.

This is a very interesting proposal you have presented.  I will consider it seriously over the weekend.

Fear of 'them' will never allow you to achieve what you want to, but knowledge of what can happen and simple prudence to cover yourself is never a bad idea.

I think what he's getting at is a quote from Sen. Palpatine "I WILL MAKE IT LEGAL."  IE. They don't need a reason and you don't necessarily need to have broken any laws to bring them down on you.  They will pass whatever laws they need to achieve their ends.

Ergo, protect yourself accordingly.

This speaks to my question from the other day.  The issue of commodity money vs. non-commodity money is inherent in the evolution of the use of the commodity as money.  That one commodity was chosen by the market through time as the one which could be universally exchanged for any other commodity is the process which bitcoin cannot replicate. 

The evolution of the marketplace which eschewed commodity money for fiat money (the current situation) is commonly brought up as a repudiation for commodity money by those with a vested interest in maintaining the fiat currency regime.  The question to be considered is what is the limitation of commodity money in a world where the property rights of the commodity can be transferred without physical transference of the commodity itself.  This was an issue under the International Gold Standard pre 1914, the necessity of moving large volumes of gold which created demand imbalances for it (or at least that is the claim of credit money apologists). 

If that was indeed the case, then a return to a truly hard money standard is impractical in today's markets, hence the rise of credit money to handle problems of liquidity to clear markets. 

Is Bitcoin (or something like it) the next step in the evolution of money itself... from commodity --> commodity backed fractional-reserve (Bretton-Woods) --> Full floating fiat exchange (Friedman's Wet Dream) --> Bitcoin (traceable, pseudo commodity [property rights enforcing], digital)?

Without currency, without a medium of exchange, there would be no civilization to allow you to pursue your desire to fold proteins.  Without an intermediate which is nearly universally demanded there is no division of labor to speak of... there is barter and barter fails at coordinating desires with time.  Commodity money is not intrinsically worthless any more than any other commodity is intrinsically worthless. 

Just because we live in an age of a debased and dishonest money, does not mean that money itself is the problem.  Sound money is the solution to many of our societal problems.